annual report 2011 - bendigo bank · 2019-05-27 · annual report 2011 oak flats community bank®...

Oak Flats Community Bank® Branch

Oak Flats Financial Services Limited

ABN: 62 093 057 768

Annual Report 2011

Oak Flats Community Bank® Branch

78 Central Avenue, Oak Flats NSW 2529

Ph: (02) 4256 9511

Fax: (02) 4256 9411

Shellharbour Branch

Shop 3, 18 Addison Street Shellharbour NSW 2529

Ph: (02) 4295 1544

Fax: (02) 4296 8106

Contents

Chairman’s Report 2

Manager’s Report 3-4

Directors’ Report 5-7

Financial Statements 8-12

Notes to the Financial Statements 13-23

Directors’ Declaration 24

Independent Auditors Report 25-26

Auditors Independence Declaration 27

Chairman’s Report

Company Performance

The profit after income tax has increased in the 2011 financial year to $88,056.92 (2010

$38,541.19). This year has seen an increase in profits due mainly to the return of some margin

after the decrease during the GFC. However there has been an adjustment of income from some

products offered by Bendigo and Adelaide Bank which will have a small effect on our margin

growth. The Board and management are working hard to not only recoup this decrease but to

drive the business forward and increase profit.

Business Developments

From early December, Shellharbour Village will have extended hours and the Board are

continuing to search for a suitable manager dedicated to that branch.

Early this year the premises at 78 Central Avenue became available for purchase and the Board

made the decision that it was in the best interests of the Company’s long term future to secure

the premises at the negotiated price. This purchase will enable the company to cap the

occupancy expenses at Oak Flats, with the only fluctuations being the interest on the outstanding

loan amount.

Community Contributions

In 2011 these contributions amounted to $310,000 (2010 $308,000). The Community Bank

continues to contribute to the local Community Service organisations, schools and social and

sporting bodies. The substantial sponsorship of $50,000 to Illawarra Light Rail Museum to

enable the Museum to start a track from the Rail Museum to the Airport Museum. This project

was seen by the board as a project that not only preserves rail history but will develop into a

tourism destination for the area. Since the end of the financial year the community contributions

of our Community Bank Branches has surpassed the 1.4 MILLION dollars, with 1.2 Million over

the last two financial years.

Dividends

The increase in profit has enabled the board to declare a normal dividend of 12 cents per share

and a special dividend of 3 cents per share, a total of 15 cents per share.

I would like to thank the Board, Karen Layton and her team at Oak Flats, Karen Guyer and her

team at Shellharbour, the shareholders and our customers for their continued efforts to make

this Company a success.

Yours Sincerely,

Geoff Egan

Chairman

2

Manager’s Report For year ending 30 June 2011

As we enjoyed the celebration of our 10th year of business at Oak Flats last year, we are

heading towards the 5th birthday for our Shellharbour Community Bank®

Branch in this financial year.

During this year we will be extending the hours of operation at Shellharbour to full time

Monday – Friday 9am – 5pm and Saturday mornings 9am – 12 noon . This will involve

appointing a new Branch Manager and staff member to accommodate for these new

hours.

As at 30 June 2011 the customer numbers are now 5772. Whilst our total business size

grew between the two branches by $7.4 million to $128.3 million this was down on the

expected growth levels we had anticipated due to the strong competition from other

financial institutions.

The ATM continues to provide a reliable level of service to the Bank’s customers as well

as to other Bank customers with 145,000 transactions for the year.

Earlier this year we saw margins reviewed by Bendigo & Adelaide Bank Limited which will

impact on our profitability by reducing the amount of profit share being returned to the

Community Bank® branches going forward.

Our focus still is to concentrate on lending growth to both personal and business clients

and deposit retention. We will be instigating a marketing and promotion of the points of

difference between our Community Bank® and other financial institutions being the

distribution of funds to the sporting and non profit organisations by way of sponsorships,

grants and donations.

Again this year we contributed over $300,000 to our supporters within the community to

help assist with their events.

There have been a couple of changes in staffing mid year with Lesley needing to take

over 12 months off work due to illness and Karen Guyer moved to our Shellharbour

Community Bank® Branch.

A new staff member Kylie Hanigan commenced employment as a relief officer and you

will see her at either of the two branches. Welcome Kylie.

Thank you to all of our staff for their support and efforts over the past year in providing a

high level of service.

I would like to thank the Directors for all the support and work which has helped to make

this a successful company.

It is with regret that one of the long standing Board members Nancy Brooker decided to

leave the Board earlier this year, she is the wife of original Board member Alan Brooker.

Good luck Nancy.

3

To the Shareholders, many of who are customers, thank you for your ongoing support and

business and we ask that you actively act an as advocate of your Community Bank® .

Word of mouth recommendations are the strongest and best advertising we can ask for.

With your continued support we will be able to grow even further and increase the

support we can give back to our local organisations and groups.

Karen Layton

Branch Manager

4

Directors' Report

For the Financial Year ended 30 June 2011

Your directors present this report on the company for the financial year ended 30 June 2011.

Directors

The names of the directors in office at any time during or since the end of the year are:

Name of Director Period as Director Qualifications, experience & special responsibilities

Geoffrey Michael Egan 26 May 2000 Chartered Accountant Chairman

Michael Francis Gamble 26 May 2000 Solicitor Secretary

Jennifer Marie Butler 26 May 2000 Semi-Retired

Nancy Brooker 26 Sept 2001 Retired Resigned 2 May 2011

Peter John O'Dea 26 May 2000 Business Owner

Neil Greig 7 May 2002 Business Owner

Dale Robert Whittaker 26 May 2000 Business Owner

Terrence Barton 9 May 2006 Business Owner

Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.

Principal activities

The principal activities of the Company during the course of the financial year were in providing

Community Bank® services under management rights to operate a franchised branch of

Bendigo and Adelaide Bank Limited.

There has been no significant changes in the nature of these activities during the year.

Operating results

Operations have continued to perform in line with expectations. The profit/(loss) of the Company

for the financial year after provision for income tax was $88,056.92 (2010: $38,541.19).

Dividends

Cents per share $

Final dividends recommended:

Ordinary Dividend of 12 Cents plus Bonus dividend of 3 Cents 15 69,016.20

Dividends paid in the year:

- As recommended in the prior year report 12 55,212.96

Significant changes in the state of affairs

In the opinion of the directors there were no significant changes in the state of affairs of the

company that occurred during the financial year under review not otherwise disclosed in this

report.

Year ended 30 June 2011

The accompanying notes form part of these financial statements. These statements should be read in conjunction with the attached audit report

5

Directors Report Continued

Significant events after the balance date

There are no matters or circumstances that have arisen since the end of the financial year

that have significantly affected or may significantly affect the operations of the Company, the

results of those operations or the state of affairs of the Company, in future years.

Likely developments

The Company will continue its policy of providing banking services to the community.

Directors' benefits

Indemnification and insurance of Directors and Officers

The Company has indemnified all Directors and the Manager in respect of liabilities to other

persons (other than the Company or related body corporate) that may arise from their position as

Directors or Managers of the Company except where the liability arises out of conduct involving

the lack of good faith.

Disclosure of the nature of the liability and the amount of the premium is prohibited by the

confidentiality clause of the contract of insurance. The Company has not provided any insurance

for an Auditor of the Company or a related body corporate.

Directors meetings

The number of Directors meetings attended by each of the Directors of the Company during the

year were:

Directors' Meetings

Name of director Number attended Other Committee

Geoffrey Michael Egan 11 of 11 9 of 10

Michael Francis Gamble 11 of 11 4 of 4

Jennifer Marie Butler 10 of 11 5 of 5

Nancy Brooker 9 of 9 5 of 5 Resigned 2 May 2011

Peter John O'Dea 4 of 11 1 of 3

Neil Greig 9 of 11 3 of 3

Dale Robert Whittaker 10 of 11 8 of 8

Terrence Barton 8 of 11 2 of 3

No director has received or has become entitled to receive, during or since the financial year, a benefit

because of a contract made by the company or related body corporate with a director, a firm which a

director is a member or an entity in which a director has a substantial financial interest other than that

mentioned in Note 20.


6

Directors’ Report Continued

Proceedings on Behalf of Company No person has applied for leave of Court to bring proceedings on behalf of the company or intervene

in any proceedings to which the company is a party for the purpose of taking responsibility on behalf

of the company for all or any part of those proceedings. The company was not a party to any such

proceedings during the year.

The directors received the following declaration from the auditor of the Company:

Auditors Independence Declaration In relation to our audit of the financial report of Oak Flats Financial Services Ltd for the financial year

ended 30 June 2011, to the best of my knowledge and belief, there have been no contraventions of

the auditor independence requirements of the Corporations Act 2001 or any applicable code of

professional conduct.

Signed in accordance with a resolution of the Board of Directors:

…………………………………………………….

Geoff Egan

Chairman

…………………………………………………….

Michael Gamble

Director

Signed at Oak Flats on 31 October 2011

7

Financial Statements

Statement of Financial Performance

For the year ended 30 June 2011

Note 2011 2010

$ $

Revenue 2 1,455,380.28 1,320,056.03

Gross profit 1,455,380.28 1,320,056.03

Marketing -30,437.89 -6,936.94

Selling expenses -53,756.08 -57,202.87

Administration expenses -1,228,379.39 -1,193,199.11

Finance Costs -12,274.94 -849.60

Operating profit before income tax 130,531.98 61,867.51

Income tax attributable to operating profit (loss) 4 42,475.06 23,326.32

Operating profit after income tax 88,056.92 38,541.19

Retained profits at the beginning of the financial year 66,585.95 74,055.56

Total available for appropriation 154,642.87 112,596.75

Dividends provided for or paid 5 55,212.96 46,010.80

55,212.96 46,010.80

Retained profits at the end of the financial year 99,429.91 66,585.95

Earnings per share (cents per share)

- basic for profit / (loss) for the year 22 19.14 8.37

- diluted for profit / (loss) for the year 22 19.14 8.37

The accompanying notes form part of these financial statements.


8

Financial Statements

Statement of Financial Position


2011 2010$ $

Current Assets

Cash assets 6 134,373.53 231,604.28

Receivables 7 119,271.36 113,723.23

Other financial assets 8 83,338.68 83,338.68

Other 9 33,355.91 32,364.19

Total Current Assets 370,339.48 461,030.38

Non-Current Assets

Property, plant and equipment 10 771,770.56 154,093.36

Intangible assets 11 47,361.06 8,416.89

Other 9 44,514.34 63,868.66

Total Non-Current Assets 863,645.96 226,378.91

Total Assets 1,233,985.44 687,409.29

Current Liabilities

Payables 12 23,729.87 25,503.17

Current tax liabilities 13 64,604.06 48,185.32

Total Current Liabilities 88,333.93 73,688.49

Non-Current Liabilities

Building Loan- Bendigo Bank 487,363.94

Provisions 14 107,749.66 96,026.85

Total Non-Current Liabilities 595,113.60 96,026.85

Total Liabilities 683,447.53 169,715.34

Net Assets 550,537.91 517,693.95

Equity

Contributed equity 15 451,108.00 451,108.00

Retained profits 99,429.91 66,585.95

Total Equity 550,537.91 517,693.95


9

Financial Statements Continued

Statement of Cash Flow


2011 2010

$ $

Cash Flow From Operating Activities

Receipts from customers 1,447,389 1,287,369

Payments to Suppliers and employees 1,245,259- 1,195,330-

Interest received 2,071 10,917

Interest and other costs of finance 12,275- 850-

Dividends received 6,420 4,451

Income tax paid 23,326- 38,867-

Net cash provided by (used in) operating activities (note 2) 175,020 67,691

Cash Flow From Investing Activities

Payment for:

GST Paid

Shares in other companies 6,750-

Payments for Franchise fees 50,000- 50,000-

Payments for property, plant and equipment 642,128- 3,894-

Net cash provided by (used in) investing activities 692,128- 60,644-

Cash Flow From Financing Activities

Proceeds of borrowings 490,000

Loan Repayments 14,911-

Dividends paid 55,212- 46,011-

Net cash provided by (used in) financing activities 419,877 46,011-

Net Movement in Cash 97,231- 38,965-

Net increase (decrease) in cash held 97,231- 38,965-

Cash at the beginning of the year 231,604 219,436

Cash at the end of the year (note 1) 134,374 180,471


10


2011 2010

$ $

Note 1. Reconciliation Of Cash

For the purposes of the statement of cash flows, cash includes cash on hand and in banks and

investments in money market instruments, net of outstanding bank overdrafts.

Cash at the end of the year as shown in the statement of cash flows is reconciled to the related items

in the balance sheet as follows:

Cash At Bank - Oak Flats 32,005 73,113

Dividend Account 2,489 2,495

Cash At Bank - Shellharbour 98,972 40,385

Term Deposit - 132926064 115,003

Cash On Hand - Oak Flats 608 308

Cash On Hand - Shellharbour 300 300

134,374 231,604

Note 2. Reconciliation Of Net Cash Provided By/Used In Operating Activities To Net Profit

Operating profit (loss) after tax 88,056 38,541

Depreciation 24,447 26,359

Amortisation 30,410 23,354

Interest 12,274

Increase/(decrease) in provision for income tax 19,149 -15,541

Changes in assets and liabilities net of effects of purchases and disposals of controlled entities:

(Increase) decrease in trade and term debtors -6,286 -14,507

(Increase) decrease in prepayments -992 -11,437

(Increase) decrease in Shares

Increase (decrease) in trade creditors and accruals -1,136 11

Increase (decrease) in other creditors -637 1,026

Increase (decrease) in employee entitlements 11,723 10,201

Increase (decrease) in sundry provisions -2,730 9,683

Net cash provided by operating activities 175,020 67,691


11


Statement of Changes in Equity


2011 2010

$ $

Share capital

Balance at start of year 451,108 451,108

Issue of share capital - -

Share issue costs - -

Balance at end of year 451,108 451,108

Retained earnings / (accumulated losses)

Balance at start of year 66,586 74,056

Profit/(loss) after income tax expense 88,057 38,541

Dividends paid 55,213- (46,011)

Balance at end of year 99,430 66,586


12

Notes to the Financial Statements

For year ended 30 June 2011

Note 1: Statement of Significant Accounting Policies

The financial report is a general purpose financial report that has been prepared in accordance with

Australian Accounting Standards, Urgent Issues Group Consensus Views and other authoritative

pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.

The financial report covers Oak Flats Financial Services Ltd as an individual entity. Oak Flats Financial

Services Ltd is a company limited by shares, incorporated and domiciled in Australia.

The financial report has been prepared on an accruals basis and is based on historical costs and does not

take into account changing money values or, except where stated, current valuations of non-current

assets. Cost is based on the fair values of the consideration given in exchange for assets.

The following is a summary of the material accounting policies adopted in the preparation of the financial

report. The accounting policies have been consistently applied, unless otherwise stated.

Statement of compliance

The financial report complies with Australian Accounting Standards, which include Australian equivalents to

International Financial Reporting Standards ('AIFRS'). Compliance with AIFRS ensures that the financial report,

comprising the financial statements and notes thereto, complies with International Financial Reporting

Standards ('IFRS'). Australian Accounting Standards that have been recently issued or amended, but are not

yet effective, have not been adopted in the preparation of this financial report

Income tax

Income tax has been brought to account using the liability method of tax-effect accounting whereby the

income tax expense is based on the profit from ordinary activities adjusted for permanent differences.

Timing differences, which arise due to the different accounting periods in which items of revenue and expense

are included in the determination of accounting profit and taxable income, are brought to account as either

provision for deferred income tax or an asset described as future income tax benefit at the rate of income tax

applicable to the period in which the benefit will be received or the liability will become payable.

Property, Plant and Equipment

Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any

accumulated depreciation.

a) Plant and equipment

The carrying amount of plant and equipment is reviewed annually to ensure it is not in excess of the

recoverable amount from those assets. The recoverable amount is assessed on the basis of the expected

net cash flows that will be received from the assets employment and subsequent disposal. The expected

net cash flows have not been discounted to present values in determining the recoverable amounts.

The cost of fixed assets constructed within Oak Flats Financial Services Ltd includes the cost of materials,

direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads.

The accompanying notes form part of these financial statements. These statements should be read in

conjunction with the attached audit report13

Notes to the Financial Statements Continued b) Depreciation

The depreciable amount of all fixed assets including buildings and capitalised leased assets, but excluding

freehold land, is depreciated on a straight line basis over their useful lives to Oak Flats Financial Services

Ltd commencing from the time the asset is held ready for use. Properties held for investment purposes

are not subject to a depreciation charge. Leasehold improvements are depreciated over the shorter of

either the unexpired period of the lease or the estimated useful lives of the improvements.

The depreciation rates used for each class of depreciable asset are:

Class of Asset Depreciation Rate %

Leasehold improvements 10 %

Plant and equipment 10 - 30 %

Other plant and equipment 10 - 15 %

Leases

Lease payments under operating leases, where substantially all the risks and benefits remain with the

lessor, are charged as expenses in the periods in which they are incurred.

Investments

Non-current investments are measured on the cost basis. The carrying amount of non-current

investments is reviewed annually to ensure it is not in excess of the recoverable amount of these

investments. The recoverable amount is assessed from the quoted market value for listed investments or

the underlying net assets for other non-listed investments.

The expected net cash flows from investments have not been discounted to their present value in

determining the recoverable amounts.

Intangibles

Establishment costs have been amortised over 15 years on a straight line rate. Franchise fees are

amortised over the period of the franchise on a straight line amount of 20% per year.

Employee entitlements

Provision is made for the liability for employee entitlements arising from services rendered by employees

to balance date. Employee entitlements expected to be settled within one year together with

entitlements arising from wages and salaries, annual leave and sick leave which will be settled after one

year, have been measured at their nominal amount. Other employee entitlements payable later than

one year have been measured at the present value of the estimated future cash out flows to be made

for those entitlements.

Contributions are made by Oak Flats Financial Services Ltd to an employee superannuation fund and are

charged as expenses when incurred.

Cash

For the purpose of the statement of cash flows, cash includes cash on hand and in all call deposits with

banks or financial institutions, investments in money market instruments maturing within less than two

months, net of bank overdrafts.

Comparative Figures

Where required by Accounting Standards comparative figures have been adjusted to conform with

changes in presentation for the current financial year.

Notes to the Financial Statements The accompanying notes form part of these financial statements. These statements should be read in conjunction with the attached audit report

14

2011 2010

$ $

Note 2: Revenue

Operating Activities:

Interest revenue 2,070.77 10,917.15

Dividend revenue 6,420.00 4,451.00

Other operating revenue:

Gross Receipts - Oak Flats 1,127,106.22 1,022,987.78

Gross Receipts - Shellharbour 317,783.29 278,820.10

Other Income - Oak Flats 2,000.00 2,415.00

Other Income - Shellharbour 465.00

Rebates & Refunds - Oak Flats

1,455,380.28 1,320,056.03

*Interest from:

Bendigo and Adelaide Bank Limited 2,070.77 10,917.15

2,070.77 10,917.15

**Dividends from:

Bendigo and Adelaide Bank Limited 6,420.00 4,451.00

6,420.00 4,451.00

Note 3: Profit from Ordinary ActivitiesProfit (loss) from ordinary activities before income tax has been determined after:

Charging as Expense:

Amortisation of non-current assets:

- Preliminary expenses 17,727.60 17,727.60

- Other intangibles 12,639.94 4,000.08

- Share issue expenses 1,626.72 1,626.72

Total amortisation expenses 31,994.26 23,354.40

Bad and doubtful debts 735.40 2,812.30

Borrowing costs:

- Other persons 12,274.94 849.60

Total borrowing costs 12,274.94 849.60

Depreciation of non-current assets:

- Plant and equipment 24,447.00 26,359.00

Total depreciation expenses 24,447.00 26,359.00

Notes to the Financial Statements Continued

Revenue

Interest revenue is recognised on a proportional basis taking in to account the interest rates applicable

to the financial assets.

Dividend revenue is recognised when the right to receive a dividend has been established.

Revenue from the rendering of a service is recognised upon the delivery of the service to the customers.

All revenue is stated net of the amount of goods and services tax (GST).


15


2011 2010

$ $

Note 4: Income TaxThe prima facie tax payable on profit from ordinary activities before income tax is reconciled

to the income tax as follows:

Prima facie income tax payable on operating profit at 30%. 39,159.60 18,560.40

Add Tax effect of:

Imputation credit - Bendigo Bank Shares 825.30 572.40

Amortisation - Oak Flats prior to blackhole writeoff provisions 1,168.80 1,643.70

Employee Entitlements 3,516.90 3,060.30

Entertainment 539.70 1,397.40

Super paid - not cleared 16.20

45,226.50 25,234.20

Less:

Imputation Credit 2,751.00 1,908.00

Income tax expense attributable to profit from ordinary activities 42,475.50 23,326.20

activities

Note 5: DividendsDividends provided for or paid 55,121.96 46,010.80

55,121.96 46,010.80

Note 6: Cash assets

Bank accounts:

Cash At Bank - Oak Flats 32,004.93 73,113.11

Dividend Account 2,488.90 2,494.96

Cash At Bank - Shellharbour 98,971.70 40,384.93

Term Deposit - 132926064 115,003.28

Other cash items:

Cash On Hand - Oak Flats 608.00 308.00

Cash On Hand - Shellharbour 300.00 300.00

134,373.53 231,604.28

Reconciliation of Cash:

Cash at the end of the financial year as shown in the statement of cash flows is reconciled to

items in the statement of financial position as follows:

- Cash 134,373.53 231,604.28

134,373.53 231,604.28

Note 7: Receivables

Current

Trade debtors 119,271.36 113,723.23

119,271.36 113,723.23


16


2011 2010

$ $

Note 8: Other Financial Assets

Current

Shares in other corporations - at cost:

- Listed on a prescribed stock exchange 83,338.68 83,338.68

83,338.68 83,338.68

Note 9: Other Assets

Current

Prepayments 33,355.91 32,364.19

33,355.91 32,364.19

Non Current

Preliminary expenses 106,650.00 106,650.00

Less: accumulated amortisation -68,942.41 -51,214.81

37,707.59 55,435.19

Share issue expenses 23,955.60 23,955.60

Less: accumulated amortisation -17,398.85 -15,772.13

6,556.75 8,183.47

Borrowing expenses

Other 250.00 250.00

44,514.34 63,868.66

Note 10: Property, Plant and Equipment

Buildings:

- At cost 630,040.11

630,040.11

Leasehold improvements:

- At cost 313,243.87 309,348.87

- Less: Accumulated depreciation -194,694.00 -175,246.00

118,549.87 134,102.87

Plant and equipment:

- At cost 83,762.58 75,573.49

- Less: Accumulated depreciation -60,582.00 -55,583.00

23,180.58 19,990.49

771,770.56 154,093.36


17


2011 2010

$ $

Note 11: Intangible Assets

Other intangibles:

- At cost 60,000.00 65,454.55

- Less: Accumulated amortisation -12,638.94 -57,037.66

47,361.06 8,416.89

Note 12: Payables

Unsecured:

- Trade creditors 16,873.87 18,010.17

- Other creditors 6,856.00 7,493.00

23,729.87 25,503.17

Note 13: Tax Liabilities

Current

GST clearing 22,129.00 24,859.00

Taxation 42,475.06 23,326.32

64,604.06 48,185.32

Note 14: Provisions

Non Current

Employee entitlements* 107,749.66 96,026.85

107,749.66 96,026.85

* Aggregate employee entitlements liability 107,749.66 96,026.85

There were 12 employees at the end of the year

Note 15: Contributed Capital

460108 Ordinary shares at $1.00 each fully paid 451,108.00 451,108.00

Ordinary shares participate in dividends and the proceeds on winding up of the company in proportion to the number

of shares held.

At shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each

shareholder has one vote on a show of hands.


18


2011 2010

$ $

Note 16: Remuneration & Retirement BenefitsDirectors' Remuneration

Number of directors whose income from the company or any related parties was within the

following bands

$ $ No No

100 - 2,000 6 6

2,000 - 15,000 2 2

The names of directors of the company who have held office during the financial year are:

Geoffrey Michael Egan Chairman, Sponsorship, Remuneration,Strategic

Michael Francis Gamble Company Secretary,Strategic,Remuneration

Jennifer Marie Butler Sponsorship, Audit

Nancy Brooker Sponsorship, Audit

Peter John O'Dea Marketing, Audit

Neil Greig Marketing, Audit

Dale Robert Whittaker Remuneration, Audit, Marketing

Terrence Barton Shellharbour Committee

Note 17: Superannuation Commitments

Note 18: Auditors' Remuneration

Remuneration of the auditor of the company for:

Auditing or reviewing the financial report 1,720.00 1,630.00

1,720.00 1,630.00

Note 19: Contingent Liabilities

In the opinion of the directors there are no contingent liabilities at balance date.

Note 20: Related Parties

The company has registered as an employer with the fund nominated by each employee. Contributions to

the funds are based a percentage of employees gross remuneration and are made by the employer.

Contributions to the plan will not exceed the permitted levels prescribed by the income tax legislation from

time to time

Transactions between related parties are on normal commercial terms and conditions no more favourable than those

available to other parties unless otherwise stated.

Directors

Transactions with directors:

Professional fees of $22,465 for share registry, dividend payment processing, office administration, taxation and

accounting were paid to G.M. Egan & Co., of which Geoffrey Egan is the principal.


19


2011 2010

$ $

46,010.80 55,212.96

125,047.00 104,089.00

9,997.00 16,657.00

19,719.00 23,663.00

0.1914 0.0837

88,056.92 38,541.19

460,108.00 460,108.00

Note 21: Dividends paid or provided for on ordinary shares (a) Previous year final

Franked dividends - 12 cents per share (2010: 12 cents per share) (b) Dividends proposed and not recognised as a liability Franked dividends - 12 cents per share (2010: 12 cents per share) (c) Franking credit balance The amount of franking credits available for the subsequent financial year are: - Franking account balance as at the end of the financial year at 30% - Franking credits that will arise from the payment of income tax payable as at

the end of the financial year

- Franking debits that will arise from the payment of dividends as at the end

of the financial year

The tax rate at which dividends have been franked is 30% (2010: 30%). Dividends proposed will be franked at a rate of 30% (2011: 30%).

Note 22: Earnings per share Basic earnings per share amounts are calculated by dividing profit / (loss)

after income tax by the weighted average number of ordinary shares

outstanding during the year.

The following reflects the income and share data used in the basic and

diluted earnings per share computations:

Profit/(loss) after income tax expense

Weighted average number of ordinary shares for basic

and diluted earnings per share

Note 23: Financial Instruments Net Fair Values

The net fair values of financial assets and liabilities approximate the

carrying values as disclosed in the Balance Sheet. The company does not

have any unrecognised financial instruments at year end.

There are no material credit risk exposures to any single debtor under

financial instruments entered into by the economic entity.

20


Note 24. Financial risk management

The Company has exposure to credit risk, liquidity risk and market risk from their use of financial instruments.

This note presents information about the Company's exposure to each of the above risks, their objectives,

policies and processes for measuring and managing risk, and the management of capital.

The Board of Directors has overall responsibility for the establishment and oversight of the risk management

framework. The Board has established an Audit committee which reports regularly to the Board. The Audit

committee is assisted in the area of risk management by an internal audit function.

(a) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument

fails to meet its contractual obligations. For the Company it arises from receivables and cash assets.

The maximum exposure to credit risk at reporting date to recognised financial assets is the carrying amount of

those assets as disclosed in the Statement of financial position and notes to the financial statements. The

Company's maximum exposure to credit risk at reporting date was:

2011 2010

$ $

Cash assets 134,374 231,604

Receivables 119,271 113,723

- -

253,645 345,327

The Company's exposure to credit risk is limited to Australia by geographic area. The entire balance of

receivables is due from Bendigo and Adelaide Bank Ltd.

None of the assets of the Company are past due (2010: nil past due) and based on historic default rates, the

Company believes that no impairment allowance is necessary in respect of assets not past due.

The Company limits its exposure to credit risk by only investing in liquid securities with Bendigo and Adelaide

Bank Ltd.

(b) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The

Company ensures it will have enough liquidity to meet its liabilities when due under both normal and stressed

conditions. Liquidity management is carried out within the guidelines set by the Board.

Typically, the Company maintains sufficient cash on hand to meet expected operational expenses, including

the servicing of financial obligations. This excludes the potential impact of extreme circumstances that cannot

reasonably be predicted, such as natural disasters.

Carrying amount


21


Financial risk management (continued)

The following are the estimated contractual maturities of financial liabilities, including estimated interest

payments.

Carrying Contractual 1 year over 1 to more than

amount cash flows or less 5 years 5 years

30 June 2011 $ $ $ $ $

Payables - - - - -

Loans and borrowings - 59,724 59,724 238,896 597,240

- 59,724 59,724 238,896 597,240

30 June 2010

Payables - - - - -

Loans and borrowings - - - - -

- - - - -

(c) Market risk

Market risk is the risk that changes in market prices, such as interest rates, will affect the Company's income

or the value of its holdings of financial instruments. The objective of market risk management is to manage

and control market risk exposures within acceptable parameters.

Interest rate risk

Interest rate risk is that the fair value or future cash flows of a financial instrument will fluctuate because of

changes in market interest rates. The Company reviews the exposure to interest rate risk as part of the

regular Board meetings.

Sensitivity analysis

At the reporting date the interest rate profile of the Company's interest bearing financial instruments was:

2011 2010

Fixed rate instruments $ $

Financial assets -

Financial liabilities 487,364 -

487,364 -

Variable rate instruments

Financial assets -

Financial liabilities -

-

Carrying amount


22


Fair value sensitivity analysis for fixed rate instruments

The Company does not account for any fixed interest rate financial assets or liabilities at fair value through profit

or loss. Therefore a change in interest rates at the reporting date would not affect profit or loss.

Cash flow sensitivity analysis for variable rate instruments

A change of 100 basis points in interest rates at the reporting date would have no impact on profit or retained

earnings. For the analysis performed on the same basis as at 30 June 2010 there was also no impact. As at

both dates this assumes all other variables remain constant.

23. Financial risk management (continued)

(d) Net fair values

The net fair values of financial assets and liabilities approximate the carrying values as disclosed in the

Statement of financial position. The Company does not have any unrecognised financial instruments at year

end.

(e) Capital management

The Board's policy is to maintain a strong capital base so as to sustain future development of the Company. The

Board of Directors monitor the return on capital and the level of dividends to shareholders. Capital is represented

by total equity as recorded in the Statement of financial position.

In accordance with the franchise agreement, in any 12 month period, the funds distributed to shareholders shall

not exceed the Distribution Limit.

(i) the Distribution Limit is the greater of:

(a) 20% of the profit or funds of the Franchisee otherwise available for distribution to

shareholders in that 12 month period; and

(b) subject to the availability of distributable profits, the Relevant Rate of Return multiplied by

the average level of share capital of the Franchisee over that 12 month period; and

(ii) the Relevant Rate of Return is equal to the weighted average interest rate on 90 day bank

bills over that 12 month period plus 5%.

The Board is managing the growth of the business in line with this requirement. There are no other externally

imposed capital requirements, although the nature of the Company is such that amounts will be paid in the form

of charitable donations and sponsorship. Charitable donations and sponsorship paid for the year ended 30 June

2011 can be seen in the Statement of comprehensive income.

There were no changes in the Company's approach to capital management during the year.


23

Director’s Declaration

In accordance with a resolution of the Directors of OAK FLATS FINANCIAL SERVICES LTD we state

that:

1. In the opinion of the Directors

a. The Statement of Financial Performance of the company is drawn up so as to give a true

and fair view of the loss of the company for the financial year ended 30th June 2011;

b. The Statement of Financial Position is drawn up so as to give a true and Fair view of the

state of affairs of the company as at 30th June 2011 and

c. At the date of this statement there are reasonable grounds to believe that the company

will be able to pay it debts as and when they fall due.

2. The Company in respect of the financial year to which those accounts relate:

a. Has kept such accounting records as correctly record and explain the transactions and

financial position of the company;

b. Has kept its accounting records in such a manner as would enable true and fair

accounts of the company to be prepared from time to time; and

c. Has kept its accounting records in such manner as would enable the accounts of the

company to be conveniently and properly audited in accordance with the Corporations Law.

3. The accounts to which this statement relates have been properly prepared by a competent

person.

On behalf of the Board

Geoff Egan

Chairman

Michael Gamble

Director

Signed at Oak Flats on 31 October2011

24

Independent Auditors Report

To the members of Oak Flats Financial Services Limited

ABN 62 093 057 768

We have audited the accompanying financial report of Oak Flats Financial Services Ltd,

which comprises the balance sheet as at 30 June 2011, and the income statement,

statement of changes in equity and cash flow statement for the year ended on that date, a

summary of significant accounting policies, other explanatory notes and the directors’

declaration.

Directors’ Responsibility for the Financial Report

The directors of the Oak Flats Financial Services Ltd, are responsible for the preparation and

fair presentation of the financial report in accordance with Australian Accounting Standards

(including the Australian Accounting Interpretations) and the Corporations Act 2001. This

responsibility includes designing, implementing and maintaining internal control relevant to

the preparation and fair presentation of the financial report that is free from material

misstatement, whether due to fraud or error; selecting and applying appropriate accounting

policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We

conducted our audit in accordance with Australian Auditing Standards. These Auditing

Standards require that we comply with relevant ethical requirements relating to audit

engagements and plan and perform the audit to obtain reasonable assurance whether the

financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and

disclosures in the financial report. The procedures selected depend on the auditor’s

judgement, including the assessment of the risks of material misstatement of the financial

report, whether due to fraud or error. In making those risk assessments, the auditor

considers internal control relevant to the entity’s preparation and fair presentation of the

financial report in order to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the

entity’s internal control. An audit also includes evaluating the appropriateness of accounting

policies used and the reasonableness of accounting estimates made by the directors, as well

as evaluating the overall presentation of the financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide

a basis for our audit opinion.

Independence

In conducting our audit, we have complied with the independence requirements of the

Corporations Act 2001. We confirm that the independence declaration required by the

Corporations Act 2001, provided to the directors of Oak Flats Financial Services Limited, on

4th November 2011, would be in the same terms if provided to the directors as at the date of

this auditor’s report.

25

Independent Auditors Report Continued

Auditor’s Opinion

In our opinion the financial report of Oak Flats Financial Services Ltd, is in accordance with the

Corporations Act 2001, including:

(a) giving a true and fair view of Oak Flats Financial Services Ltd, financial position as at 30

June 2011 and of its performance for the year ended on that date; and

(b) Complying with Australian Accounting Standards (including the Australian Accounting

Interpretations) and the Corporations Regulations 2001.

___________________________________________________

Murray Reid,

R M Chartered Accountants

Victoria Street Wollongong

4th November 2011

26 26

Auditors Independence Declaration

To the audit client

As Lead Engagement partner/Auditor for the audit of Oak Flats Financial Services Ltd, for the year

ended 30th June 2011, I declare that, to the best of my knowledge and belief, there have been:

no contraventions of the auditor independence requirements of the Corporations Act in

relation to the audit; and

no contraventions of any applicable code of professional conduct in

relation to the audit.

RM Chartered Accountants

Wollongong NSW

4th November 2011

27

Franchisee: Oak Flats Financial Services Limited

67A Central Avenue, Oak Flats 2529

ABN: 62 093 057 768

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